The Tennessee Supreme Court recently refused to recognize liability for potential negligence from a home inspector to the third party guest of the purchaser of a home.
In Grogan v. Uggla, No. M2014-01961-SC-R11-CV (Tenn. Nov. 21, 2017), plaintiff was injured when he was a social guest at a home and leaned against a second floor deck railing, which gave way and caused plaintiff to fall. During a home inspection prior to the purchase of the home, the “home inspector noted problems with the deck flooring of the second story deck but not with the railing.” The purchasers had the sellers replace the deck flooring, but not the railing. After plaintiff’s fall, a “forensic inspection of the railing showed that it had been improperly constructed using interior finishing nails rather than galvanized nails.” Plaintiff filed suit against several defendants, including the home inspector and the home inspection franchise.
Regarding defendant home inspector, the complaint alleged that he “should have known that the second floor rear exterior deck railing was constructed with interior finishing nails in violation of local, state, and national building codes, and constituted an unreasonable risk of harm…” The complaint further alleged that the home inspector did not perform the proper tests on the deck railing and that he “failed to report that [it] was negligently constructed in violation of local, state, and national building codes.”
During his deposition, defendant home inspector testified that “the deck railings felt firm and well anchored,” and that “if there had been movement, he would have reported it as a safety risk.” He also admitted that “one purpose of a home inspection is to assure the safety of the occupants of the home.”
The trial court granted summary judgment to defendant home inspector and franchise, and the Court of Appeals affirmed. This appeal to the Supreme Court followed, with the Court ultimately affirming summary judgment.
In its analysis, the Court first determined that plaintiff was asserting two claims against the home inspector—one for negligent misrepresentation and one for negligent inspection. The Court noted that the U.S. Supreme Court has “reasoned that negligence in an inspection underlying a report was part of a claim of negligent misrepresentation,” and that here the plaintiff made claims regarding both the home inspector’s failure “to report negligent construction” and his allegedly negligent performance of the home inspection. (citing U.S. v. Neustadt, 366 U.S. 696 (1961)).
On the negligent misrepresentation claim, the Supreme Court affirmed summary judgment, finding that such a claim requires an affirmative misstatement. Here, “the undisputed material facts…are that the home inspector failed to discover any defect in the deck railing and that as a result he did not report any defect.” The Court pointed out that the inspector “did not affirmatively state that the deck railing was safe,” and that plaintiff could thus not show that defendant home inspector gave false information.
Next, the court looked at plaintiff’s claim of “ordinary negligence in the form of a negligent inspection.” The Court noted that it had “not previously considered a case involving an allegedly negligent home inspection,” and that there were few cases from other jurisdictions where a third party non-client was asserting the claim. Looking more broadly at “other types of contracted inspections of property,” though, the Court determined that Section 324A of the Restatement (Second) of Torts should be used as an analytical framework for determining “whether a particular defendant may be held liable to a third party for physical harm resulting from an allegedly negligent contractual inspection.” This Restatement section states:
One who undertakes, gratuitously or for consideration, to render services to another which he should recognize as necessary for the protection of a third person or his things, is subject to liability to the third person for physical harm resulting from his failure to exercise reasonable care to protect his undertaking, if
(a) his failure to exercise reasonable care increases the risk of such harm, or
(b) he has undertaken to perform a duty owed by the other to the third person, or
(c) the harm is suffered because of reliance of the other or the third person upon the undertaking.
While the Court found this Restatement section applicable, it ultimately found that plaintiff was “not entitled to relief.” The Court found that “the boundaries of the defendants’ undertaking are circumscribed by the parameters of the evidence, in particular the inspection agreement and the deposition testimony, in addition to the pertinent statutes.” The Court reasoned:
The complaint in this case alleges that the defendant home inspector knew or should have known that the deck railing did not meet applicable building codes. …Thus, under Section 324A, the plaintiff is arguing that the defendant voluntarily assumed a duty to protect the plaintiff by performing a building codes inspection on the deck railing and should be subject to liability for the plaintiff’s physical harm resulting from the defendant’s failure to exercise reasonable care in performing the building codes inspection. However, based on the statutes, regulations, deposition testimony, and agreement between the parties, the defendant home inspector did not undertake a building codes inspection. The agreement between the defendant home inspector and his client states that the inspection is visual only and not a building codes inspection. …In addition, the statutes state that a home inspection is not a compliance inspection for building codes. A building codes inspection was outside the scope of the services rendered by the defendant home inspector, and he cannot be held liable for failure to perform a building codes inspection with reasonable care.
The Court further found that the inspection was for the benefit of the client only, and that “nothing in the defendant home inspector’s deposition testimony or any other evidence presented indicated that he undertook an additional duty to protect third parties.” Based on these conclusions, the Court ruled that defendant “negated the essential element of duty, and summary judgment was appropriate.”
Justice Lee filed a dissenting opinion in this case, wherein she stated that “it was foreseeable that a negligent inspection of the home, and particularly the second-story deck railing, could result in a significant injury to a guest.” In her view, the “foreseeability and the gravity of the harm outweighs the burden on the home inspector to protect against the harm.” Further, she pointed out that “public policy favors the imposition of a duty of care on the home inspector,” and she thus argued that “a home inspector, as a matter of law, owes a duty of reasonable care to a guest of the homeowner.” She opined that a jury should have had the chance to determine whether the home inspector in this case breached his duty.
Justice Kirby also wrote a separate opinion, concurring in part and dissenting in part. She agreed that Section 324A was the proper framework for the negligence claim, but disagreed with the majority’s conclusion that defendant home inspector “did not render services that they knew or should have known was for the protection of third parties because their services were for the benefit of their client alone and they therefore did not assume a duty to the plaintiff.” Justice Kirby found this holding to be inconsistent with the Restatement, inconsistent with prior Tennessee case law, illogical, and “a classic fact question for the jury to decide.” Regarding the negligent misrepresentation claim, Justice Kirby wrote that it should have been considered a failure to warn claim instead, “which by its very nature involves an omission by the defendant, in this case, a failure to warn the client of the condition of the deck railing.”
This case was very case specific, as third-party claims regarding a negligent home inspection apparently do not arise often. However, attorneys asserting third-party claims under other factual scenarios would be wise to take note of this opinion, because as Justice Kirby wrote at the end of her separate opinion, “even though this case arises under unique facts, the troublesome aspects of the majority’s analysis could end up being cited as precedent in a wide range of fact patterns for many years to come.”